SDLT charities relief available on joint purchases

Fri 07 Mar 2014

As promised in the Autumn Statement, the Finance Bill will confirm that relief from stamp duty land tax (SDLT) is available to charities on their share of joint property purchased with non-charities, in line with last year’s Court of Appeal ruling in the Pollen Estates case.

This will benefit charities purchasing property for charitable purposes jointly with non-charities.

When a charity buys a property that is to be used for charitable purposes, charities relief is available so that no SDLT is payable on the purchase.  The existing legislation says that charities relief applies “if the purchaser is a charity” and H M Revenue & Customs (HMRC) previously took the view that, for joint purchases where not all the purchasers were charities, this phrasing precluded charity purchasers from getting relief on their share of the property acquired.

Last year, however, the Court of Appeal decided, in the joined cases of The Pollen Estate Trustee Company Limited and Kings College London, that the legislation should be interpreted so as to allow partial relief by charities in such circumstances, applying the relief “to the extent that the purchaser is a charity”.

The enactment of this rule will apply with effect from the date of Royal Assent to the Finance Bill and confirms that charities will be able to obtain relief on a joint purchase provided that they use the greater part of their share of the property for a charitable purpose.

The relief will apply to a proportion of the usual SDLT calculation determined by reference to the lower of

• the charity’s share of the total purchase consideration paid and
• the charity’s share in the property acquired.

The SDLT payable by the non-charity purchaser on its share of the property will be calculated using the rate appropriate for the total consideration paid by all the joint purchasers including the charity.

This is a welcome clarification of the rules regarding the application of SDLT charities relief which brings increased certainty for charities contemplating the joint acquisition of property with non-charities.

Although the changes only come into effect from Royal Assent, following the Appeal Court decision HMRC invited charities to make claims for any overpaid SDLT on joint purchases with non-charities and, therefore, it would be expected that charities will also obtain relief for joint purchases occurring prior to Royal Assent.

It is unfortunate that HMRC did not take this opportunity to clarify the meaning of the words “greater part” in the relevant exemption (i.e. whether a charity uses the greater part of its share of a property for charitable purposes) as this may leave some uncertainty remaining in some cases.